Halsey v. Fedcap Rehab. Servs., Inc.

95 F.4th 1

Sara HALSEY and Susan Kiralis-Vernon, Plaintiffs, Appellants, v. FEDCAP REHABILITATION SERVICES, INC., Defendants, Appellees.

No. 23-1351

United States Court of Appeals, First Circuit

March 4, 2024

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE [Hon. Nancy Torresen, U.S. District Judge]

Oriana Farnham, with whom William C. Herbert, Frank D'Alessandro, Hardy, Wolf & Downing, P.A., and Maine Equal Justice were on brief, for appellants.

Sarah K. Grossnickle, with whom Martha C. Gaythwaite, John P. Giffune, and Verrill Dana LLP were on brief, for appellee.

Before Montecalvo, Lynch, and Rikelman, Circuit Judges.

LYNCH, Circuit Judge.

Sara Halsey and Susan Kiralis-Vernon, the appellants, were participants in Additional Support for People in Retraining and Employment - Temporary Assistance for Needy Families (ASPIRE-TANF), a program promulgated by the state of Maine. See Me. Stat. tit. 22, § 3781-A(2). The purpose of ASPIRE-TANF is to "provide services and support to recipients of Temporary Assistance for Needy Families [(TANF), a federal program that provides grants to participating states,] and to reduce dependence on public assistance to the extent that adequate funding is available for that purpose." Id. § 3781-A(3). Maine's Department of Health and Human Services (Department) has been given the responsibility of administering the ASPIRE-TANF program. See id. § 3781-A(2). Under the governing statute, the Department may contract with a private agency to deliver services to participants in ASPIRE-TANF and is responsible for monitoring any such contract agency. See id. § 3782-A(2)-(3). ASPIRE-TANF participants have the right to a fair hearing before the Department in accordance with the Maine Administrative Procedure Act (MAPA). See id. §§ 3762(9)(B), 3788(2); Me. Stat. tit. 5, § 9051(1).

Halsey and Kiralis-Vernon brought this action in the U.S. District Court for the District of Maine against Fedcap Rehabilitation Services, Inc., (Fedcap) for damages, alleging that Fedcap violated its obligations in its role as a contract agency hired by the Department to administer ASPIRE-TANF services. Their complaint also alleges that a Fedcap employee verbally assaulted Kiralis-Vernon at least in part because of her race, color, or national origin. Despite the Maine legislature's provision for an administrative review process to resolve disputes under ASPIRE-TANF, appellants did not seek to notify the Department of their complaints or to pursue their complaints through administrative hearings before the Department. The district court granted Fedcap's motion to dismiss on the ground that the appellants had not first pursued an administrative remedy before the Department as required by Maine law. Halsey v. Fedcap Rehabilitation Services, Inc., No. 1:22-cv-00119, 2023 WL 2529385, at *10 (D. Me. Mar. 15, 2023).

Halsey and Kiralis-Vernon appeal from the district court's grant of Fedcap's motion to dismiss. The appellants brought the case pursuant to diversity jurisdiction, and the parties agree that the issues presented are issues of Maine law. Applying Maine law as set forth in Maine statutes, regulations, and the decisions of the Maine Law Court, we affirm the district court's ruling as it pertains to the appellants' claims that Fedcap violated its obligations under the ASPIRE-TANF and other programs. We have no need to and do not address whether appellants have a viable claim for monetary damages as to those claims. We vacate the district court's dismissal of Kiralis-Vernon's claim that a Fedcap employee verbally assaulted her and remand for further proceedings on that claim.

I.

A.

TANF is a federal program that provides grants to participating states to fund programs that "provide[ ] assistance to needy families with (or expecting) children and provide[ ] parents with job preparation, work, and support services to enable them to leave the program and become self-sufficient." 42 U.S.C. § 602(a)(1)(A)(i). Maine established the ASPIRE-TANF program to "provide services and support to recipients of [TANF] and to reduce dependence on public assistance to the extent that adequate funding is available for that purpose." Me. Stat. tit. 22, § 3781-A(3). ASPIRE-TANF is administered by Maine's Department of Health and Human Services. Id. §§ 1-A(2), 3781-A(2). The Department is charged with "provid[ing] case management services to individuals participating in the ASPIRE-TANF program." Id. § 3782-A(1). Under the governing statute, an ASPIRE-TANF participant may receive support services depending on the results of a case manager's "initial assessment to determine that individual's education, training and employment needs based on available program resources, the participant's skills and aptitudes, the participant's need for supportive services, local employment opportunities," and other factors. Id. § 3788(3). A participant is entitled to receive such services, but only "[t]o the extent that sufficient funds, training sites and employment opportunities are reasonably available." Id. § 3788(4-A).

"The [D]epartment may contract with public and private agencies and individuals to deliver employment, training and other services for [ASPIRE-TANF] participants consistent with the purposes of the program." Id. § 3782-A(2). The Department is required to monitor any such "contract agency at least annually to ensure compliance with [governing statutory provisions] to ensure compliance with the contracts entered into by the parties and to ensure that quality services are provided for program participants." Id. § 3782-A(3). The Department is further required to "adopt rules in accordance with [MAPA] by which satisfactory performance [of a contract agency] is measured." Id. Rules governing services under ASPIRE-TANF "apply equally to all participating [TANF] recipients, whether those services are provided by the [D]epartment or any other agency, organization or individual providing TANF program services to participants." Id. § 3786.

To receive TANF benefits, a participant must enter with a representative of the Department into a "family contract," which lists services the participant may receive, as well as the requirements with which the recipient must comply to avoid sanctions to their benefits. Id. §§ 3763(1)-(1-A), 3788(4-A). When a participant enters into the ASPIRE-TANF program, the family contract is amended in accordance with statutory requirements. Id. § 3763(1). A participant may request an amendment to their family contract at any time. Id. § 3788(2).

As an alternative, under certain defined circumstances, ASPIRE-TANF participants may apply to participate in Maine's Parents as Scholars program instead of receiving TANF benefits. Id. § 3790(2). Parents as Scholars is a student financial aid program whose purpose is to "aid needy students who have dependent children and who are matriculating in postsecondary . . . education programs." Id. § 3790(1)-(2). Enrollees who are accepted into the program "must be provided with a package of student aid that includes aid for living expenses equivalent to that provided" under TANF. Id. § 3790(1). Similar to ASPIRE-TANF, an applicant's eligibility for the Parents as Scholars program depends upon an initial assessment by a Department case manager. Id. § 3790(2). Eligibility must be granted "[t]o the extent that program resources and space permit," and only if the assessment results in particular findings, such as that "the individual has the aptitude to successfully complete the proposed postsecondary program." Id. No more than 2,000 individuals may be enrolled in the Parents as Scholars program at a given time. Id. § 3790(1). "When there are fewer than 2,000 enrollees in the [program]," the Department is required to "inform all persons applying for ASPIRE-TANF and all ASPIRE-TANF participants reviewing or requesting to amend their education, training or employment program under ASPIRE-TANF of the Parents as Scholars Program and shall offer them the opportunity to apply for the program." Id. § 3788(1-A).

Notice must be given of an ASPIRE-TANF participant's "right to request . . . a fair hearing." See id. § 3788(2); see also 10-144 Me. Code R. ch. 1, § 1 (providing that Department adjudicatory hearings "include proceedings whereby dissatisfied applicants, recipients, institutions, or other persons whose legal rights, duties, or privileges are at issue can obtain review of certain actions or inactions of the [Department] where such legal rights, duties or privileges are required by constitutional law or statute to be determined after an opportunity for hearing"). Such hearings are governed by MAPA. Me. Stat. tit. 22, § 3762(9)(B); Me. Stat. tit. 5, § 9051(1).

B.

Because this appeal follows a motion to dismiss, we recite the facts as alleged in the complaint. See Medina-Velázquez v. Hernández-Gregorat, 767 F.3d 103, 105 (1st Cir. 2014).

In 2016, the Department contracted with Fedcap to deliver employment, training, and other services to ASPIRE-TANF program participants. In its capacity as a contract agency, Fedcap had the authority to make final determinations as to the content of program participants' family contract amendments, to request support service benefits from the Department on participants' behalf, and to request sanctions from the Department to reduce or terminate TANF benefits.

Subject to the Department's monitoring and other obligations, Fedcap also assumed responsibility for services which ASPIRE-TANF participants were to receive under Maine statutory law, agency rules, common law, and contract provisions. The appellants' complaint, which omits material references to certain limiting language as to the existence of Fedcap's and the Department's obligations, allege that Fedcap was required to:

• inform program participants of available education, employment, and training opportunities and support services, and how to request and receive them;

• assess program

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